audit final ch questions

adverse opinion

f..s. are not presented fairly in accordance with GAAP, deficiencies in f.s. are pervasive and material

the auditors may conclude that depreciation charges are insufficient by noting

excessive recurring losses on assets retired - show that the depreciation expense recognized during the actual useful lives of the assets has been less than the real cost of using the assets

when a primary risk related to an audit is possible overstated inventory, the assertion most directly related is

existence because inclusion of inventory items that do not exist in inventory total result in an overstated inventory

the auditors are most likely to seek information from the plant manager with respect to the

existence of obsolete machinery

which of the following should be included as a part of the inventory costs of a manufacturing company

DL, Raw Materials & Factory Overhead

not typical of PPE as compared to most current asset accounts

PPE cutoff error near year-end has a more significant effect on NI

audit of which of the following accounts is most likely to reveal evidence relating to recorded retirements of equipment

a/d

internal control weakness related to factory equipment

all purchases of factory equipment are required to be made by the department in need of the equipment - purchasing dept has the expertise and the established procedures and documents to insure that all purchases are made in accordance with company policy

the document issued by a common carrier acknowledging the receipt of goods and setting forth the provision of the transport agreement is the

bill of lading acknowledges the receipt of goods and sets forth provisions of transportation agreement

ordinarily, the most significant assertion relating to a/p is

completeness - because an understatement of liabilities overstates net income

in an audit, the valuation of year-end accounts payable is most likely addressed by

confirmation

the organization established by Congress to narrow the options in cost accounting that are available under GAAP is the

cost accounting standards board

an suit of the balance in the a/p account is ordinarily not designed to

detect a/p that are substantially past due

which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory?

examination of the condition of inventory during the auditor's observation of the physical inventory

best audit procedure for determining the existence of unrecorded liabilities

examine selected cash disbursements in the period subsequent to year end - all liabilities must eventually be paid, and will therefore be reflected in the accounts when paid if not when incurred

auditors vouch a sample of entries in the purchases journal to supporting documents. assertion

existence

when perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak, the auditor would probably

insist upon a physical count at year-end

a/p department should compare the information on each vendor's invoice with the

receiving report and purchase order -

a client erroneously recorded a large purchase twice, which of the following i/c measures would be most likely to detect this error in a timely and efficient manner?

reconciling vendors' monthly statements with subsidiary payable ledger accounts

account that should be reviewed by the auditors to gain reasonable assurance that additions to PPE are not understated?

repairs

emphasis - of - matter

required when doubt about going concern and changing accounting principles (refers to a matter presented or disclosed in the f.s. but is being emphasized

disclaimer of opinion

scope of limitation that creates a situation in which the auditors are unable to obtain sufficient audit evidence - not an opinion, states the auditors don't express an opinion

least likely to be completed before the balance sheet date

search for unrecorded liabilities - a significant portion of the search for unrecorded liabilities deals with transactions recorded after year-end, it is least likely to be completed before the balance sheet date

instead of taking a physical inventory count on the balance sheet date, the client may take physical counts prior to the year-end if internal control is adequate and

the professional standards allow auditors to use physical counts prior to year-end when client has well-kept perpetual inventory records

auditor confirmation of a/p balances at the b/s date may be unnecessary because

there is likely to be other reliable evidence available to support the balances - such as vendors invoices and statements that substantiate the a/p

emphasis on the testing for property accounts is on

transactions that occurred during the year

to determine that each voucher is submitted and paid only once, when payment is approved, supporting documents should be canceled by the

individual who signs the checks

to strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic

inspection of equipment and reconciliation with accounting records

least likely to be among the auditor's objectives in the audit of inventories and cogs

inventory need not be on hand at year-end. for example, purchases in transit on which title has passed to the client should also be included

McPherson Corp does not make an annual physical count of year-end inventories, but instead makes weekly test counts on the basis of a statistical plan. during the year, sara mullins, CPA, observes such counts as she deems necessary and is able to satisfy herself as to the reliability of the client's procedures. in reporting not eh results of her examination, Mullins

may issue an unqualified opinion as long as she is satisfied that the client's procedures are adequate to provide a reliable inventory balance

the receiving department is least likely to be responsible for the

preparation of a shipping document

qualified

presented fairly in accordance with GAAP "except for" the effects of some matter. f..s are materially misstated (departure from GAAP) or when auditors are unable to obtain sufficient audit evidence (scope of limitation) basis for modification paragrpah

the primary objective of a CPAs observation of a client's physical inventory count is to

provide sufficient competent evidence as to the existence of the inventory and the controls over the inventory taking process.

an effective procedure for identifying unrecorded retirements of equipment is to

select items of equipment in the accounting records and then locate them in the plant

when confirming a/p the approach most likely to be one of

selecting the accounts of companies with whom the client has previously done the most business, plus a sample of other accounts

least likely approach in auditing management's estimate relating to an accrued liability is to

send confirmations relating to the estimate -

not an overall test of the annual provision for depreciation expense

test deductions from a/d for assets purchased during the year - should not result in the deductions from the a/d account

the auditor's analytical procedures will be facilitated if the client

uses a standard cost system that provides variance reports - they allow the auditors to identify significant deviations from expected values

to assure accountability for fixed asset retirements, management should implement an internal control that includes

utilization of serially numbered work orders

audit of intangible assets typically involves

vouching of the cost asset and testing allocation methods

a material departure from GAAP will result in auditor consideration of

whether to issue an adverse opinion rather than a qualified opinion